Recent Troubles In The MGA Market Likely Isolated Incidents

PR Newswire Association LLC

HARTFORD,Conn., April 22, 2014 /PRNewswire/ -- Several insurers operating through the Managing General Agent (MGA) market have recently incurred financial challenges, and concerns exist that these cracks are signs of more problems to come. Conning's research suggests that these are isolated incidents, and that the long-term outlook for the MGA market is favorable, according to a new study by Conning.

"Managing General Agencies are a key distribution resource for insurers focused on specialty markets," said Bill Broomall, analyst at Conning. "While the MGA market has endured periods of volatility due to their association with a number of insurer failures, the model now appears to be stable due to improvements in risk management practices. With almost ten percent of commercial premium in 2012, the MGA channel is critical to accessing specialty risks."

"Based on our research, insurers with meaningful relationships with MGAs have remained fairly consistent. The market consists of large global insurers and those insurers with a business model primarily focused on writing or servicing program business," said Steve Webersen, director of research at Conning. "Insurers of all different sizes use MGAs to produce premium, often a more meaningful channel for the small and midsized insurers. Our analysis of MGA insurers indicated that as a group they generated direct premium growth above the commercial property-casualty industry in seven of the past ten years and have also outperformed the commercial market in loss ratio. The long-term outlook appears favorable, as the MGA market appears well positioned to grow from current levels. MGAs willing to incorporate technology and data analytics into their product offering can enhance their value proposition to insurers and hold a competitive advantage over the long term."